FCC upholds super tax, secures Rs310 billion revenue

The Federal Constitution Court (FCC) on Tuesday declared Pakistan’s super tax provisions under Sections 4-B and 4-C of the Income Tax Ordinance (ITO), 2001, constitutional and enforceable from their respective dates of imposition. According to a report by Dawn News.

A three-member bench, headed by FCC Chief Justice Aminuddin Khan and including Justices Syed Hasan Azhar Rizvi and Syed Arshad Hussain Shah, delivered the short order after a brief morning hearing. The detailed judgment will follow later.

Senior counsel Hafiz Ahsaan Ahmad Khokhar, representing the Revenue Division secretary, said the ruling resolves more than 2,200 pending tax cases, safeguarding an estimated Rs310 billion in public revenue.

The cases were transferred to the FCC after the passage of the 27th Constitutional Amendment. Appeals had been filed against decisions of the Sindh, Lahore, and Islamabad high courts, where businesspersons, banks, and companies had challenged the retrospective imposition of the super tax, citing double taxation, inequity, and irrational slabs.

The super tax was first introduced in 2015 by the PML-N government as a one-time levy under a money bill to fund rehabilitation of areas affected during Operation Zarb-i-Azb. Previously, an additional 5 percent tax applied to annual profits above Rs300 million. In 2022, it was extended to individuals earning above Rs150 million, with a maximum rate of 10 percent. Sections 4-B and 4-C currently impose 4 percent on banking companies and 3 percent on other sectors.

The FCC held that Parliament has the exclusive authority to legislate on taxation and that high courts had exceeded their jurisdiction by striking down or reading down Section 4-C, violating the doctrine of separation of powers. All appeals filed by the Federal Board of Revenue (FBR) secretary and Inland Revenue commissioner were confirmed as maintainable.

The court also clarified specific provisions: benevolent funds are excluded, while oil and gas exploration companies can seek exemptions individually through relevant tax commissioners under the 1948 concession regime.

The FCC ruling reaffirms that courts may only interpret tax law, not alter slabs, rates, or fiscal policy. It sets aside prior high court judgments that challenged Section 4-C.

The FBR said the decision is expected to contribute around Rs300 billion to the public exchequer.